New 10-Year JGB Yield Rises to 2.865% Briefly, Highest in 30 Years

2026-07-08

Oil Price Gains Drive Bond Selling

In Japan's bond market on the 8th, the yield on newly issued 10-year government bonds, a benchmark for long-term interest rates, rose as high as 2.865% at one point. That was the highest level since September 1996, or 30 years ago, and was up 0.02 percentage point from the previous day. Bond prices fell.

US Sanctions Reimposed Add Pressure

Rising oil prices fuelled bond selling through inflation concerns. The US Treasury Department said on the 7th that it had restored sanctions on Iranian crude oil and petrochemical products. The move was described as a response to Iran's attacks on commercial vessels transiting the Strait of Hormuz, and US crude futures surged in response. US long-term yields also rose to the 4.5% range, reinforcing worries about upside pressure on prices at home and abroad.

Persistent Worries Over Fiscal Management

Views that fiscal deterioration will advance under the Sanae Takaichi administration are also adding upward pressure on yields. In the draft of the basic policy on economic and fiscal management and reform, or the 'honebuto' policy, compiled by the government at the end of June, the phrase 'fiscal consolidation' that had been included through 2025 was removed. Investors are holding back from buying amid speculation that aggressive fiscal policy will loosen fiscal discipline and make yields easier to rise.

Speculation Over Bank of Japan Policy Also Weighs

In the same draft, the Bank of Japan's 'appropriate monetary policy management' was positioned as 'very important'. In the market, concerns are growing that BOJ policy operations could be swayed by the government's intentions, raising the risk that interest-rate increases will fail to keep pace with price rises and the central bank will fall 'behind the curve'. That has led to bond selling and a wait-and-see stance, pushing up long-term yields.

Minister for Economic and Fiscal Policy Minoru Kiuchi said on the 7th that market reactions to the draft of the honebuto policy were 'a misunderstanding that differs from the intent.' Long-term yields also eased at one point that day, but the decline did not continue, and they had briefly updated their 30-year high to 2.85%.

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